Their long-held cozy position at the forefront of American entertainment has come under increasing threat over the past few years, in the face of fierce competition from streaming video content.

According to The NPD Group, streaming video already represents 25% of the home video market in the United States. And it’s no surprise that Netflix (Nasdaq: NFLX) has a vice-like grip on the market. It accounted for 61% of movies downloaded or streamed in the United States during January and February.

But it’s not just movies that has consumers going digital. JP Morgan (NYSE: JPM) reports that 47% of Netflix customers could ditch paid television altogether.

And why not? You can either pay $100 or more a month for a bunch of cable stations you never watch. Or sign up for Netflix and Hulu Plus, get all the programs and movies you could possibly want, and pay less than $20 month.

For me, the choice was easy. And I’ve never looked back.

I’ll got out on a limb and predict it’s just a matter of time before countless other consumers wise up to the cost savings and convenience and follow my lead, too.

But rather than adopt the “If you can’t beat ‘em, join ‘em” philosophy – i.e. embracing the obvious shift to internet video and negotiating with streaming service providers – some networks are deciding to wage war.

How? By blocking their online content from streaming on Google TV devices – a ridiculous move, since Google TV offers exactly the same content you’d receive by simply visiting the networks’ websites.

As a Google spokesperson said, Google TV “enables access to all the Web content you already get today on your phone and PC. But it’s ultimately the content owner’s choice to restrict users from accessing their content on the platform.”

Thing is, only Time Warner customers had access to the stations. As in, people who were already stuffing money into the networks’ pockets. Even Time Warner didn’t get it, stating, “Most TV network owners agree with us that this is a great convenience for our customers and their viewers.”

But apparently, networks would rather shoot themselves in the foot than realize their customers now expect a different experience than they did 10 years ago – and adapt accordingly.

Perhaps Gizmodo explains the networks’ absurd actions best: “[It] comes down to two main things: greed (they view tablet streaming as a premium service) and delusion (envisioning a television future involving coaxial cable and a rigid schedule for programming).”

The Cable Exodus Has Already Begun

Bottom line: As old-school networks try to put the kibosh on streaming content, they’re only alienating the very customers they should be trying to keep and who are shifting to streaming content instead.

Need proof? JP Morgan reports 28% of cable users would consider cutting the cord completely if they didn’t have access to what they want. And of that group, 63% said they’d make the switch to streaming, even if it meant missing out on some content (i.e. sports).

So essentially, networks could continue to block certain channels to streaming sources… but it won’t matter.

On the flip side, Netflix’s “customer base has exploded by 113%” over the last two years according to my colleague, Alex Moschina. And if network owners don’t jump on the new entertainment bandwagon soon, they should prepare to lose the majority of customers.

Of course, it’s not going to happen overnight. But if you consider that the cable television business lost 741,000 customers in the third quarter of 2010, I’d say the exodus is already underway.

Good investing,

Justin Fritz

Justin Fritz joined the financial publishing business seven years ago (after a brief two-year stint teaching seventh-grade English). He served as Wall Street Daily's Executive Editor for three years. He also worked as Senior Writer, focusing mainly on technology and biotech coverage. Learn More >>

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